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AP Microeconomics

Subjects : economics, ap
  • Answer 50 questions in 15 minutes.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF

2. The difference between total revenue and total explicit costs

3. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage

4. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK

5. All firms maximize profit by producing where MR = MC

6. The rational decision maker chooses an action if MB = MC

7. The most desirable alternative given up as the result of a decision

8. The imbalance between limited productive resources and unlimited human wants

9. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.

10. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.

11. Ed > 1 - meaning consumers are price sensitive

12. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good

13. When firms focus their resources on production of goods for which they have comparative advantage

14. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good

15. Exists at the point where the quantity supplied equals the quantity demanded

16. The additional benefit received from the consumption of the next unit of a good or service

17. AFC = TFC/Q

18. The difference between total revenue and total explicit and implicit costs

19. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good

20. Ei > 1

21. The change in quantity demanded resulting from a change in the price of one good relative to other goods

22. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.

23. Ed < 1

24. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity

25. Total product divided by labor employed. APL = TPL/L

26. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits

27. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC

28. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient

29. The mechanism for combining production resources - with existing technology - into finished goods and services

30. MUx / Px = MUy/Py or MUx/MUy = Px/Py

31. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital

32. Exists if a producer can produce more of a good than all other producers

33. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income

34. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms

35. Models where firms are competitive rivals seeking to gain at the expense of their rivals

36. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it

37. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.

38. A good for which higher income increases demand

39. The total quantity - or total output of a good produced at each quantity of labor employed

40. The output where ATC is minimized and economic profit is zero

41. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit

42. Costs that change with the level of output. If output is zero - so are TVCs.

43. Ei = (%dQd good X)/(%d Income)

44. The price of a good measured in units of currency

45. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry

46. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources

47. Models where firms agree to mutually improve their situation

48. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)

49. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price

50. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption